---
title: What is LTV:CAC ratio?
url: https://markin.ai/glossary/ltv-cac-ratio
category: Revenue and ARPU metrics
---

# LTV:CAC ratio

> The LTV:CAC ratio divides expected customer lifetime value by fully loaded customer acquisition cost. It is a unit-economics test: a ratio near one means growth destroys value, while a very high ratio usually means the business is underinvesting in acquisition rather than excelling at it.

## How it is calculated

```
LTV:CAC = Lifetime value / Fully loaded acquisition cost
```

Load CAC with everything: media, incentives, sales, onboarding. Partial CAC is the most common way this ratio flatters a business.

## Why it matters for ARPU

Lifting ARPU improves the numerator without spending more on media, which is the cheapest route to healthier unit economics in a mature base.

## Related terms

- [Lifetime value](https://markin.ai/glossary/lifetime-value), Lifetime value is the discounted margin a business expects from a customer over the whole relationship.
- [Payback period](https://markin.ai/glossary/payback-period), Payback period is the time taken for the gross margin generated by a customer to repay the cost of acquiring them.
- [ARPU](https://markin.ai/glossary/arpu), ARPU, average revenue per user, is total revenue in a period divided by the average number of active users in that period.
- [Contribution margin per user](https://markin.ai/glossary/contribution-margin-per-user), Contribution margin per user is revenue per user minus the variable costs of serving that user: delivery, payment fees, support, content or bandwidth, and any incentive granted.

## Go deeper

- [ROI calculator](https://markin.ai/roi-calculator), Unit economics with your numbers.
- [ARPU spreads are widening](https://markin.ai/blog/arpu-spreads-widening-b2c-2026), Why the gap between leaders and the rest grows.

Source: https://markin.ai/glossary/ltv-cac-ratio